Managing Performance and Productivity of Amazon

Objective: To provide a critical analysis of the challenges and opportunities which will help in effectively and efficiently manage the productivity and performance of Amazon to increase profit, alongside committing to appropriately manage the human resources and consideration of the sustainability of the planet.

 Introduction

Amazon.com was established in 1994 by Jeff Bezos as an e-commerce store which sells books. When initiating this platform Jeff’s intention was to provide “an everything store” for his consumers and be earth’s biggest bookstore. (Avery Hartmans,2021)

Almost three decades later, the company has grown to become the biggest e-commerce store in the world with an annual turn over of approximately $ 400 Bn and is one of the most valuable brands worldwide.(Daniela Coppola,2021)

Amazon currently operates with nearly 1.3Mn. employees locally and internationally. In 2020 they have recruited over 500,000 workers.

 

 

 

 

 

 

 

 

 

(Taylor Scope,20 21)

Known as an “ambidextrous organization” the company improves its existing business while creating an organizational space to invent future businesses. This approach is one of the prime reasons for Amazon’s continues growth, as they become innovative by expanding to many diverse ventures. Some examples of these are Amazon Prime Videos and AWS cloud computing which are in par with latest technologies and customer entertainment. (Kavi Guppta,2016)

Despite how well the organization has dominated the retail world, an organizations sustainability is not only assessed by its profitability but by the balance of the triple bottom line which includes effective human resource management and the contribution to the environmental footprint (planet). (Timothy F.Slaper & Tanya J.Hall,2017)

As an established organization, let us now take a deeper look into its current environment before we derive how it has impacted the overall organization’s performance and productivity.

2.    Importance of operations management.

Amazon’s value proposition includes,

Providing customer low prices – value for money,  fast and accurate delivery of goods and services and provide customers vast selection of items or rather be “Earth’s biggest selection” store.

(Dr Murat Uenlue,2018)

As the largest e-commerce store in the world, there are many factors that will distinguish the success of the said values and ensuring customer satisfaction and retention. Effective operations management is crucial for an organization such as Amazon as it administrates the business by establishing practices to create high levels of efficiency by converting materials and labor into goods and services to maximize the profit of the organization. (Adam Hayer,2021)

The cost of operation management will depend on the overall production process of the business.

 Importance of leadership in operations management

Leaders have the task of making decisions that will determine the success of effective operation process. Organizations functions based on three core areas which is marketing, operations (production) and accounting. Let us now consider how each of these areas function in Amazon.

i.              Marketing : Amazon is known as one of the best marketers in the ecommerce sector and they continue to invest more each year on their marketing activities.

(John Dudovskiy,2020)

The leaders of this organization have succeeded in keeping the brand alive, by using serval tactics which provides them a significant advantage over other ecommerce sites.

Some of their methods are,

1. Search engine optimization (SEO): Amazon maximizes their product listing in collaboration with Google. 

2. Email marketing: while this may be a more traditional approach, Amazon uses email campaigning to provide customers with product recommendations, collect feedback and make friendly suggestions based on consumer buying behavior.

Although this may create hyper consumption and mindless purchases it has worked successfully to grow their sale. Data management also plays a key role in the organization’s marketing activities. Big data analysis is important when making decisions for the leaders. For an online retailor they can use data to decide which products to be recommend to customers based on purchasing patterns in search behavior.

3. The website: Amazon provide regular design upgrades from signups to categories which empowers sellers and buyers.  

 (Sarah Berry,2021)

ii.            Operations

For a 24X7x365 day process driven retailor such as Amazon, operations capture a significant portion of the organization’s overall success. Operations would include supply chain management to inventory management and importantly human resource management as it is a high work intensive organization. Amazon has taken the initiative to use artificial intelligence in several aspects of its operations, as some tasks are repetitive however, they still require large amount of manpower to run their operations.

Based on the study provided, Amazon is being criticized for damages made to the environment due to packing, logistics, manufacturing and energy consumption. Though the company started as a zero inventory and warehousing, the current operations has outgrown hence, company requires a lot of packing materials as well as storage spaces. With the expansion of their technological ventures the organization currently consumes an ample amount of energy in the form of lighting, cooling, transportation etc, to keep the operations running.

Further many employees have spoken of their discomfort at work both physically and mentally, violating their strict company regulations, proving to the public that the organization has a very toxic working culture. In order to be productive and continue to perform well, Amazon need to give more emphasis on providing an employee uplifting environment for employees worldwide.

For instance, Amazon has a Supply Chain Optimization Technologies division (SCOT). The members of this team have reflected about the low morale, high turnover work environment, especially in the forecasting and inventory team. The inventory planning team has also reported of been on repetitive projects for several years and the leadership has been blamed for it.

(Benjamin Fox,2020)

 

iii.           Accounting

Sound accounting is important for Amazon, to analyze their productivity. Productivity is the ratio between the outputs (goods and services) against its inputs (resources such as labor and money). Accounting includes both statistical and non-statistical details. Amazon can use several ratios to identify center wiz performance, as well as to manage their costs and help leaders in making important decisions.

Some of the key ratios of Amazon has provided following information.

·     Sales Growth Rate: As per the annual report information, Amazon's has reported an overall sales growth of 38% in 2020 and 21% in 2019. Among all profit centers Amazon web services (AWS) shows the fastest growth which shows a 37% growth in 2019 and 30% growth by 2020, despite external calamities such as global COVID19 pandemics and economic recessions.

       Profit Margin: This ratio has a direct relationship with the organization’s share pricing power. Market share will provide the organization leverage on economies of scales. From having a negative profit margin in 2014, company has reflected a 5.5% margin by 2020. This will be positive indication for the shareholders as they will have hope on receiving high dividends. (Jay Wei,2021)

 Apart from these profitability ratios, Amazon can also use contribution charts, profit/volume graphs in order to determine breakeven points, margins of safety hence productivity of the outputs against inputs when leaders must make decisions.

4.    Corporate Social Responsibility

Based on the above details, without a doubt it can be concluded that Amazon has met the profit objective of the triple bottom line. Let us now consider, what measures or activities are undertaken to safeguard employees (people) and environment (planet) which will derive the overall sustainability of the organization.

Irrespective of the size of an organization, human resource management plays a significant role from selection, recruit, safeguarding and retention of employees and help organizations to be aligned with organizations vision and mission (Clogg et al,2011). To be a sustainable leader, the workplace needs to be safe and nurturing for its employees. Despite its brand value, many employees attached to Amazon has experienced difficulties in work life balance.

Due to several controversial accusations, company has announced several initiatives such as prioritizing health and safety of employees at workplace. Specially in 2020 company has allowed employees to work from home to ensure their safety from the COVID19 pandemic across the globe.  Currently company is providing mental health benefit for employees in the US and their families. This further draws the question why the organization felt the emphasis on mental wellbeing of employees because it may have been their poor practices for many years that would have caused such complexities in the first place.

In my opinion, the new policies do not reflect equality across the organization, as most benefits are only provided to a certain regional center (USA) while organization is spread across the globe. Therefore, to be sustainable leaders, company may have to revamp their HR policies and practices and harmonize them across the organization around the world.

Company has made several sustainability commitments towards environmental footprint from utilizing renewable energy sources, recycled water consumption policies, become a zero-carbon company and provide efforts on reforestation.  Company is heavily investing in wind and solar projects to reach 80% renewable energy across all business operations by 2024 and committed to go 100% renewable energy by 2025.

Reduction of water consumption by recycling water for cooling off the IT infrastructures as well as using evaporation technologies and collection of rainwater, has been adopted with the objective of imparting thermal efficiencies.

Although the company has made a bold decision to go 100% carbon neutral by 2024, by using zero carbon packaging and optimize delivery using eco vehicles, it may be quite challenging for an entity who is highly driven on packing and deliveries through air, land and shipping. Yet it is a strong indication that as the organization is taking initiatives to safeguard the planet and to be successful sustainable leader. (John Dudovskiy,2020)

5.    Summary

Based on the information it can be observed that Amazon has recognized their challenges in the triple bottom line and taken initiatives to convert them to opportunities by the help of effective and efficient operation management, which has helped the productivity and performance of Amazon to increase profits. While the organization may need to commit to appropriate human resource management practices, they have taken several bold initiatives for the sustainability of the planet while managing their performance and productivity.